I went back to re-read some from the beginning too. The doctor's introduction at the beginning did have some purpose. I kept wondering how he fit into the story. He obviously felt some desire to record his memories of Teddy so you would have expected him to be very involved in what was happening on the island. Yet he supposedly had left on the ferry. And he met his wife on the island so where was she too? You knew something didn't fit and was being hidden. Then eventually all is revealed! And, I also wondered initially why Andrew & Rachel were referred to as the twin terrors. I'm surprised I missed the name jumble.

I was reminded of Paul Auster's City of Glass, the first book of "The New York Trilogy" which I read some years ago, in which the protagonist also turned out to be insane.

The New York Trilogy is on my 2012 challenge list, and you've just spoiled that for me .

As far as Shutter Island goes, I find it hard to say objectively whether I would have been taken in by it or not, given that I already knew the twist. That said, I thought it was well written and gripping, though there were some plot issues, such as the water pistol, which I found stretched the bounds of credulity (why not make it a real gun with blanks?), and some of the things he was supposedly allowed to do on his own, given he was the most dangerous inmate on the island.

I thought the ending worked, though, in terms of why he had gone mad - wife killing kids, then him killing her - and I found the final scene where he is about to be led off for his lobotomy chilling.

The movie is even more chilling. It adds another twist at the end.
When he's being led away for the lobotomy he asks his partner whether it's "better to live as a monster or die a good man." It makes you wonder if he wants the lobotomy and is faking the regression because he doesn't want to live with the memory of what happened to his wife and children.

It wasn't evident to me from the book that he gets a lobotomy. Perhaps that's just a movie deal, or did I miss something?

Even if lobotomy wasn't cited explicitly, in his final speech Dr. Crawley said that the only alternative to his own therapy was the "traditional" one, made of lobotomies and electroshocks.
In the final scene, when the experiment is obviously failed, Teddy saw the doctor, the warden and some orderlies coming his way bringing some white cloth with shining appendages, suggesting a straightjacket. I think it's safe to assume that that's the symbol of a violent inhuman therapy, of which lobotomy is an important part.
In this discussion, the final "lobotomy" is just an example of the treatment. In the end, Andrew/Teddy will be grinded in the "bad medecine" gears...

BTW, guys, I saw the movie today. I had been avoiding this thread for a couple of days for fear of more movie spoilers. I thought the movie was very faithful to the book, although some clues were left out. DiCaprio did a wonderful job, in my opinion.